I think the limiting factor for this is that the sensor itself is rectangular, pretty much in line with what you're expecting (aspect ratio of image produced, etc).

You could always have a square sensor, but then when shooting landscape pictures, you'd be throwing away a lot of the sensor data. In short, people generally want rectangular photos, and coupled with economics this means that sensors are that shape.

On the extreme end, I guess you could have some kind of rotating lens / sensor, which would automatically keep level.